Practical Anarchy The Freedom of the Future Part 9

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What does all this look like in terms of economic calculation? Have a look at a sample table below showing the costs and benefits of competition through arson. If we assign arson a cost of $50k, with a 50% probability of success, and a resulting economic benefit of $1m, we see a net benefit of $450k (50% of $1m – $50k in costs). So far so good. But if we include a 10% risk of blackmail, a 20% chance of retaliation, a 25% chance of increased competition – all reasonable numbers – and finally $100k in increased insurance and security costs – we can see that the economic benefits are erased very quickly (see below).

Action

Cost

Probability

Economic Effect

Net Benefits (benefit / risk – cost)

Arson

-$50k

50%

$1 mill

$450k

Blackmail

-$250k

10%

-$250k

-$25k

Retaliation

-$1 mill

20%

-$1 mill

-$200k

Increased Competition

-$500k

25%

-$500k

-$125k

Increased Costs (insurance, security)

-$100k

100%

-$100k

-$100k

Net Effect

$0

(Note that the above table only shows the economic calculations – these do not include the emotional factors of guilt, fear and worry, which are of great significance but hard to quantify. This is important because even if the above numbers were less disagreeable, the emotional barrier would still have to be overcome.)

As the above conservative example shows, it is not really worth it to attempt economic gain through the destruction of property – and that is exactly how it should be. We want people to be good, of course, but we also want strong economic incentives for virtue as well, to shore up the uncertain integrity of free will!

How does this relate to war and the State? Very closely, in fact – but with very opposite effects.

The economics of war are, at bottom, very simple, and contain three major players: those who decide on war, those who profit from war, and those who pay for war. Those who decide on war are the politicians, those who profit from it are those who supply military materials or are paid for military skills, and those who pay for war are the taxpayers. (The first and second groups, of course, overlap.)

In other words, a corporation which profits from supplying arms to the military is paid through a predation on citizens through State taxation – and under no other circumstances could the transaction exist, since the risks associated with destruction outlined above are equal to or greater than any profits that could be made.

Certainly if those who decided on war also paid for it, there would be no such thing as war, since war follows the same economic incentives and costs outlined above.

However, those who decide on war do not pay for it – that unpleasant task is relegated to the taxpayers (both current, in the form of direct taxes and inflation, and future, in the form of national debts).

Let us see how the above analysis of the costs of destruction changes when the State enters the equation.

If you want to start a war, you need a very expensive military – which must also be trained and maintained when there is no war. There is simply no way to recover the costs of that military by invading another country – otherwise, the free market would directly fund armies and invasions, which it never does. Or, if you would prefer another way of looking at it, you can only invade another country by destroying large portions of it, killing many of its citizens, and then fighting endless insurgencies.